Wall Street is being shortsighted on Meta Platforms, ignoring things that can go right

Club holding Meta Platforms (META) seems to be a hated stock on Wall Street no matter what it does. The stock hit a new 52-week low Wednesday, one day after the company unveiled its new Quest Pro headset at its 2022 Meta Connect conference. The social media giant behind Facebook and Instagram also signaled at the event that it’s as committed as ever to building out the metaverse through internal investments and key partnerships. Even with what we see as these promising metaverse developments and a robust online ad-based business, investors are not getting onboard. Here’s a rundown of the hardware news, recently announced partnerships and what’s in the pipeline. Quest Pro Starting with the Meta Quest Pro, at $1,500, the headset is targeting a different audience than its Meta Quest 2 counterpart, which starts at $400. The latter is more gaming focused and priced to incentivize broad consumer adoption, the former — though able to run games — is clearly being looked at more as a professional collaboration and productivity platform. In addition to beefed up specs, the Pro headset also features full color pass-through, allowing users to view the outside world via the camera built into the outside of the headset. The feature provides the basis for a mixed reality experience — something in between virtual reality where the real world is entirely drowned out and augmented reality where you are actually viewing the real world with your own eyes, not through camera lens, and have digital images overlying what you see to provide useful information. The device also has inward facing cameras used to capture facial expressions. It was built from the ground up with Meta’s Presence Platform , a toolkit designed to help developers build out mixed reality experiences. Tools and partnerships While the Quest Pro is impressive in its own right, what makes it really intriguing are the tools and partnerships that were announced with it. Starting with Meta’s internally developed tools, in addition to the presence platform, Meta introduced Magic Room, a tool intended to serve a mixed reality workspace. As for partnership efforts, the team noted that Autodesk (ADSK) is updating its collaborative design review app to take advantage of the Quest Pro, while Adobe (ADBE) plans to release a suite of apps for professional 3D creators. Those are certainly highly encouraging in terms of incentivizing professional adoption, but the partnership we think is transformative in terms of its potential adoption is the one announced with Microsoft (MSFT), also a Club holding. Microsoft CEO Satya Nadella joined the keynote to discuss some of the details of the collaboration. Before digging into what Microsoft will bring to the Quest Pro, we want to remind members that Microsoft does actually have its own headset, the HoloLens. As a result, we think there are a few things to read into this partnership. First, it speaks to the idea that the future of computing via headset is not a zero-sum game. Second, the applications will vary greatly, whereas Microsoft appears to be more focused on more niche applications in manufacturing, healthcare, and education, with the price point of the HoloLens starting at $3,500. Meta appears focused on gaming and less specialized professional applications with a price point more suited to broad-based adoption. So, what is Microsoft bringing to the table in partnering with Meta? For the professional side, Teams is bringing what it’s calling an “immersive meeting experience” to Quest. Slowly but surely it appears that Meta’s workplace applications and Microsoft’s will begin to converge in the metaverse with Meta CEO Mark Zuckerberg noting that his company working to enable Horizon Workrooms for Teams. We love this idea of a more open vision of the metaverse, rather than one in which all workers need to be using the same hardware from the same company. In addition to Teams, Microsoft is bringing its 365 suite — Word, Excel, PowerPoint, Outlook — to the platform, allowing Quest Pro users to interact with all the productivity apps they are already familiar with. At a higher level, with large companies in mind, Nadella added that Microsoft is bringing tools to the platform that will allow companies the ability to ensure that the security they have come to expect from personal computers and mobile devices will carry over to VR headsets. Of course, work hard, play hard and in gaming, Microsoft announced that its xCloud gaming platform is coming to Meta Quest. Providing a glimpse into what the metaverse may mean for companies, Meta highlighted Accenture’s implementation of the virtual workspace with CEO Julie Sweet joining the Meta Connect keynote to discuss how the technology is helping them manage their over 700,000-person workforce. As an IT services and consulting firm that works with 91 members of the Fortune Global 100 and over 75% of the Fortune Global 500, Accenture’s adoption of the technology is meaningful. To date, the company has deployed 60,000 Quest 2 headsets and transformed its onboarding process, bringing over 150,000 people onto its virtual campus. To aid in business adoption, Meta intends to release Quest for Business next year, a subscription bundle for Quest 2 and Pro that includes a suite of professional productivity applications. What’s to come While details were limited, we got a glimpse of a device Meta is working on that users wear on their wrist like a watch, and it allows for the use of fine motor movements for the headset by harnessing neuron signals. Though broad-based adoption is certainly far off, we think it provides yet another look into the next generation of computing as the line between the real world and the virtual world is increasingly blurred. We also learned that Meta is working on technology that will provide the ability to create digital twins of objects and lifelike avatars, innovations that should serve to further expand the use cases of the Quest lineup. Bottom Line Ultimately, the Meta Platforms’ metaverse technology is certainly in the early days. As far as Wall Street is concerned, it’s simply an investment money pit that won’t really pay off a decade from now, if at all. We, however, think the Meta Connect conference served to reaffirm the view that the future of computing is in interactive and 3D reality — be it virtual, mixed, or augmented. While we understand the frustration with the stock and skepticism regarding Meta’s vision of the future, we would encourage Club members — especially those younger members that have a longer investing horizon — to zoom out and think about the pace of innovation we have seen in recent decades. Fifty years ago, Pong became the first widely successful arcade game; 45 years ago, the Apple 2 became the first successful PC; six years after that, in 1983, we got the first consumer camcorder from Sony and what’s considered to be the birth year of the internet as we know it today. A year after that, in 1984, we got the first commercially available cellphone from Motorola — costing roughly $4,000 or nearly $12,000 in today’s dollars; it weighed two pounds and featured a whopping 30 minutes of talk time. In 1985, we got the Nintendo NES gaming console. Before DVDs came about in 1997, we had VHS. The iPod was in 2001 and then iPhone in 2007. So, in 10 years we jumped from VHS and DVDs to the iPhone. (Our thanks to Wired for helping us out with all those dates.) Today, we have consumer VR headsets produced at scale and working prototypes of motor neuron input devices for augmented reality headsets. In 50 years, we went from Pong and no internet to smart home assistants, semi-autonomous vehicles, standalone mixed reality headsets, mobile devices with blazing fast internet and orders of magnitude more computing power than the Apollo 11 mission spacecraft that brought us to the moon, cloud computing, and the early stages of gene editing technology. Oh and speaking of spaceships, some of those are now going into orbit, landing back and on earth, and being reused. Is it really so crazy to think that the bulky VR headsets we see today are akin to the early cellphone or Nintendo NES gaming console and that in 10 years’ time we could be looking at augmented reality glasses with a form factor similar to a pair of reading glasses? While some will say that Meta is taking its eye off the ball, we believe that management is instead focused on where the ball is going. We would never encourage speculation on future technology at any valuation. In the end, it’s absolutely the bottom line that matters, not promises of a future payday. At 12x forward GAAP earnings estimates and signs that Reels monetization is improving while WhatsApp monetization begins to ramp, we think the market is ignoring anything that could go right with Meta both with its current ad-based businesses and with these metaverse-oriented investments. For those simply skeptical of the metaverse or the idea of smart headsets/glasses altogether, understand that you are betting against innovation and against the likes of leaders such as Satya Nadella and Microsoft, Mark Zuckerberg and Meta Platforms. Bet against them if you like but understand that historically, the last 10 months aside, that has been a losing bet. (Jim Cramer’s Charitable Trust is long META and MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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